SEC Changes Remote Vote Weighting, Sparks Conflict of Interest Warnings
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SEC Changes Remote Vote Weighting, Sparks Conflict of Interest Warnings

New rule to allow proxy voting for contentious corporate board elections causes controversy.
Neither the author, Kingsley Alo, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The US Chambers of commerce has slammed the US Securities and Exchange commission’s (SEC) new rule on proxy voting. The influential government body described the new rule as evidence that the agency is “not serious” about rooting out and eliminating misinformation and conflicts of interest in the proxy process.

The SEC on Wednesday agreed to give investors more freedom to choose their preferred candidates for corporate board seats. The proposal would allow board members to vote by proxy in contentious corporate elections. The SEC’s leadership seeks to bolster shareholder rights as part of a more significant push for more participation in corporate board elections.

The SEC’s New Rule

The proposed changes intend to address concerns that present rules may impede and compromise the timeliness and independence of proxy-voting advice. It also prevents the exposure of the proxy-voting business to unnecessary risk of litigation and compliance expenses.

SEC chair Gary Gensler, who frequently makes his mark in the crypto scene, said the new rules would give shareholders more say on company matters.

Previously, shareholders voting remotely in contested elections had to make a choice. They had to choose between a full slate of board directors recommended by the management or a set of nominees provided by an activist investor. The new rule, however, brings the US on par with other countries like Canada and Australia. Investors can now cast their votes without being present or sending a representative at the annual meetings.

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Mixed Reactions Trail The New Amendments

Following the announcement, several industry groups and government agencies expressed concern over the new amendments. The National Association of Manufacturers expressed concern over the SEC’s suggested changes to a 2020 proxy rule. Its problem was with the lack of further analysis on the potential impact of the changes on the market.

The influential US Chamber of Commerce also reacted. It called out the SEC as being unserious about rooting out and eradicating disinformation and conflicts of interest in the proxy process. 

Despite the concerns raised, several advocates and institutional investors welcomed the idea. Amy Borrus, Leader of Washington-based Council of Institutional Investors, said the amendment should be named “the investors choice rule.” In her opinion, the tiny but crucial change ensures that investors can confidently vote using proxy cards for board nominees of their choice. Especially as the vast majority of institutional investors already do this.

SEC Moving In Line With Changing Times

The SEC may simply be adapting to the new realities facing the workplace post-pandemic. Since Covid-19, more employees have fully embraced remote work, finding it more suitable and productive.

Projected percentage of employees working remotely before and after the Pandemic. Source: Gartner

The chart above shows an increase in the number of remote workers after the pandemic. Before the lockdown, the number of employees working remotely was 30%, it has since grown to 48%. This change represents an 18% increase in the number of employees willing to work remotely after Covid-19.

According to a study by research and consulting firm Gartner, 48% of employees were expected to continue working remotely after COVID-19. Workers now also expect to spend 40% of their time working from home. At the same time, 62% expect their employers to allow them to work remotely going forward. Other statistics show that fintech companies seem to be benefiting the most from this development.

This new trend shows that the SEC may have had this in mind for their recent amendment made to the proxy-voting rule.

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